Market Summary

Yield Movements

Local currency (LCY) government bond yields in Malaysia fell an average of 14 basis points across all maturities between 2 June and 29 August, driven by monetary policy easing by Bank Negara Malaysia. On 9 July, the overnight policy rate was cut to 2.75%, while on 4 September, Bank Negara Malaysia kept the policy rate steady, to serve as preemptive measures in support of economic growth. In the second quarter (Q2) of 2025, gross domestic product grew 4.4% year-on-year, remaining within the government's target of 4.0%-4.8%.

Local Currency Bond Market Size and Issuance

The total LCY debt stock of Malaysia grew to MYR2.2 trillion on growth of 1.9% quarter-on-quarter (q-o-q) in Q2 2025, from 2.3% q-o-q in the previous quarter. Outstanding Treasuries and other government bonds rose 2.6% q-o-q on a lower volume of maturities during the quarter. The corporate bond segment grew at a slower pace (1.1% q-o-q) from the previous quarter (2.0% q-o-q) on increased maturities. Meanwhile, total LCY bond issuance contracted 12.9% q-o-q in Q2 2025, weighed down by a reduction in both government and corporate issuances. Issuances of Treasuries fell 22.3% q-o-q due to front-loaded borrowing in the first several months of the year, while corporate issuances contracted 2.7% q-o-q, partly driven by trade uncertainties.

Sustainable Bond Market

Malaysia's sustainable bond market rose to USD16.0 billion on 2.0% q-o-q growth at the end of June, dominated by sustainability bonds (68.9%) and green bonds (19.0%). Corporate bonds comprised a majority (78.1%) of the sustainable bond market, 58.9% of which carried tenors of more than 5 years, resulting in a size-weighted average tenor of 8.3 years at the end of June.